Blog | Tradies Accountant

3 Ways to Reduce Bad Debtors

Written by Tradies Accountant | March 1, 2017

The construction industry is currently going through a volatile phase. There have been numerous builders going into administration in the last few months and this has left a lot of subcontractors out of pocket. We have noticed that a lot of our subcontractors have had large exposures to builders and this can be detrimental to small business. We have a few recommendations for how to approach larger contracts:

  • Credit check: as the business owner, before you take on a new builder you should check their credit file to make sure they have a good history for paying debtors
  • Finance control: You should check with the accounts and finance team to make sure you can fully fund the contract
  • Debtor Insurance: Are you insuring your debtors? Sometimes over 40% of your balance sheet is accounts receivable – you can insure this amount

As a director, you need to make sure you have good processes and systems in place to ensure you do not expose yourself to a loss. The future of your business can be reliant on you being able to fund the contracts and then protect your debtors. The more time you spend at the start of the engagement can mean you protect your business against a massive loss. At Tradies Accountant, we can help review your accounting processes. In this review, we can give advice around your debtor processes. Contact us if you need any further assistance.